#GSTCase-67-Judgement of Hon’ble Patna High Court has a referential value while deciding the similar issue in Gujarat and therefore not binding-AAR Gujarat
CA Arpit Haldia
National Dairy Development Board,  103 taxmann.com 404 (AAR – GUJARAT)
Query 1: Whether National Dairy Development Board would be qualified as ‘Governmental Authority’ (hereinafter referred as “NDDB”) from GST?
Query 2: Whether renting of immovable property service provided by NDDB to an educational institute would be exempted under Sl. No. 4 of Notification No. 12/2017-Central Tax (Rate)?
Applicant is a statutory body constituted by an Act of Parliament, namely the National Dairy Development Board Act, 1987 (NDDB Act). The applicant has created ‘Anandalaya Educational Society’, an education institution by way of trust, to occupy and use the building and premise owned by NDDB within its campus through a lease deed at very nominal amount for enabling the institute to grow and prosper which eventually would encourage the activity of education.
The applicant believes that since the Anandalaya trust is indirectly controlled by NDDB, it would fall within the definition of ‘related party’ as provided in the GST legislation and the applicant apprehends that there may arise GST liability on the fair value of rent of the immovable property given on lease to Anandalaya Educational Society.
- Contention of the Applicant
Query 1: Definition of Governmental Authority:
The expression “governmental authority” means an authority or a board or any other body —
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution.”
The applicant referred to the judgment of Hon’ble High Court in the case of Shapoorji Paloonji & Company Ltd Vs. CCE, Patna (2016-TIOL-556-HC-Patna-ST) wherein it has been held that condition attached to the definition of the ‘governmental authority’ given in the erstwhile Service Tax legislation viz. participation of government by way of 90% or more of equity and control to carry out the functions of municipality under article 243W of the Constitution, is relevant only for the board established by the Government.
Query 2: Rental Income
The applicant submitted that as it qualifies as a ‘governmental authority’ under the GST legislature, the service of renting or leasing of its property to encourage the education institute within its campus provided by the applicant to the Anandalaya Educational Society would qualify for exemption under SR. No. 4 of Notification No. 12/2017-Central Tax (Rate).
- Observation by AAR
CGST proper officer in its submission that the judgement relied upon by the applicant is already under challenge before the Hon’ble Supreme Court and therefore the judgement of Hon’ble Patna High Court may not be considered as final.
AAR further observed that judgement of Hon’ble Patna High Court is having a referential value while deciding the similar issue in Gujarat. The interpretation of Hon’ble Patna High Court that the words “with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution” are attached only to clause (ii) of the explanation is therefore not binding.
The applicant has not submitted whether it fulfils the said condition, therefore if condition is fulfilled by the applicant then it would attract benefit of exemption, otherwise it would not be able to claim exemption.
Query 1: National Dairy Development Board (24AADCN2029C1Z5) would be qualified as ‘government authority’ from Goods and Services Tax perspective, if it fulfils the condition namely ‘with ninety percent or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243W of the Constitution”.
Query 2: Renting of immovable property service provided by National Dairy Development Board to an educational institute would be exempted under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate) and corresponding State Tax Notification, if it qualifies as ‘governmental authority’.
AAR in its decision brushed aside decision of Patna High Court stating that judgement of Hon’ble Patna High Court is having a referential value while deciding a similar issue in Gujarat. Whether decision of another High Court is binding upon appellate authorities of another jurisdiction is an issue which has been a bone of contention between the assessee and the revenue. Following are Judicial Citations in this regard
- Decisions Holding Binding precedent of Ruling of another High Court:
In C.I.T. V. Godavaridevi Saraf (113 ITR 589), Bombay High Court-Nagpur Bench has held that unless there is a contrary decision given by any other competent High Court, Tribunal functioning in another State has to proceed on the footing that the law declared by the High Court, though of another State is final law of the land. The above decision was followed by another Division Bench of Bombay High Court presided over by Mr. S.P. Bharucha,J. in C.I.T. v. SMT. NIRMALAB ITR 242) where the learned Judge speaking for the Bench held that the Appellate Tribunal, acting anywhere in the country, is obliged to respect the law laid down by the High Court though of a different State so long as there is no contrary decision of any other High Court on that question.
In SIEMENS INDIA LTD. v. K. SUBRAMANIAN, ITO (143 ITR 120) has taken the same view and held that when a High Court of another State has decided a point and the same point arises in the making of a provisional assessment, it is not open to the Income-tax Officer to ignore that decision, whatever may be the position in the making of a regular assessment, for, in a provisional assessment, as the assessee has no opportunity to satisfy the Income-tax Officer about the correctness decision. The above view was affirmed by a Division Bench of the Bombay High Court in K.SUBRAMANIAN v. SIEMENS INDIA LTD (173 ITR 136)
In the matter of The Commissioner Of Central … vs M/S.Valson Dyeing Bleaching & … on 21 September, 2010, Divisional Bench of Bombay High Court held that
It should not be overlooked that the Income-tax Act is an All-India statute and if an Income-tax Tribunal in Madras, in view of the decision of Madras High Court, has to proceed on the footing that section 140A(3) was non- existent, the order of penalty thereunder cannot be imposed by the authority under the Act. Until contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of section 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question. It is admitted before us that at the time when the Tribunal decided the question, no other High Court in the country had taken a contrary view on the question of constitutionality of section 140A(3).
- Decision Holding that Ruling of another High Court is not Binding:
Bombay High Court in another matter held that Commissioner Of Income-Tax vs Thana Electricity Supply Ltd. on 22 April, 1993
The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Tribunal within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution.
However, whatever may be the finding of the AAR, but decision of High Court cannot be brushed aside merely by referring that it only has a “referential value”. Even if a decision of a High Court has a persuasive value and it may or may not have a binding force, but then it cannot be brushed aside merely by referring it to have “referential value”. It needs to be discussed, deliberated and may or may not be followed with reasons and last but not the least what if the judgement would have had a beneficial view to the revenue. Hon’ble Madras High Court in the matter of Shankar Sundaram vs Amalgamations Ltd on 3 June, 2002 observed that
“However, the Company Law Board has to respect the law laid down by the High Court of another State when there is no contrary decision on question by any other High Court.”